Archive for May 2011

Corporate profits have been rising for nearly two years now, and GDP has been growing, as well! In fact, the majority of key indicators have been moving in the right direction, too; but home sales are still in the dumps and I still know a number of people – you probably do, too – that are still out of work and can’t find a job!

According to a memo written last week by Wayne Yamano of John Burns Real Estate, the basic day-to-day realities that keeps all of us `in the dumps’ are the ones that hit affect virtually every working American.

Job growth is dismal. Even with all the `newly created jobs’ we keep hearing about, we still have 7 million fewer people employed today than at the peak of 2008! And, while the official unemployement rate remains close to 9%, a whopping total of 15.9% are either underemployed or have given up the search entirely!

Inflation – do I really need to say it? – is here. Despite the fact interest rates are low and no one’s collecting a lot of dollars the easy way, food and energy are going up at what seems like a break-neck pace! According to AAA, gas prices are up 38% from a year ago, which is affecting all the food you buy in the grocery store. Since food and energy aren’t included in the government’s computing of the CPI, it’s easy to see why there was no adjustment to Social Security or other benefits for 2011.

Home values are down. I know, I checked mine at Zillow.com, and it’s down about 30% off its pre-meltdown peak, which was an admittedly inflated figure, anyway. We’re not alone, it appears the national average is about 31%, largely the result of having 23% of all mortgages currently `under water’.

Consumer confidence, while trending up slightly, is at 65 which is about 60 points below its 44-year historical average, according to the Conference Board’s figures updated through April.

Bottom line: It’s going to be slow, but we’ll get there. We always do. The world didn’t end last week and it won’t end next week either. When it comes to investing, it’s all about having a long-term vision tied to a purpose and an allocation that factors-out short-term events. After that, it’s just discipline. Easy, huh?

Jim

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"Let's Make A Plan"

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER™ and in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional. The Independent Financial Group does not sell financial products or securities and nothing contained herein is an offer or recommendation to purchase any security or the services of any person or organization.

A senior executive of a high-tech company loved his company stock. When it was at its peak, he’d tell all his friends about how well he and his company were doing. His advisor suggested he sell at least some of his $10 million in vested holdings, especially since he had plenty of options yet to vest and he had few other assets. No one could convince him about the dangers of his highly concentrated position. When asked what the purpose of his money was, he could never articulate it. He rode the stock all the way down to zero.

Then there was Margaret (not her real name) who loved investing. She didn’t mind taking risks because she felt she had plenty of time to make up any losses. She enjoyed trading with an online broker and began to equate risk with reward. The more she made, the more she wanted. When the markets tanked in 2008, her investment account lost more than 90% from its high and cost her half her original investment. She may have had a goal – who knows? – but, it’s evident she never considered her purpose.

Purposes are different from goals. Purpose goes beyond goals. It’s the reason we have goals.

“I want to retire at 60 with $10 million” is not a purpose. It’s a goal. Why?

“I want to be financially secure” doesn’t go deep enough. What does financial security mean? If you mean you want to maintain your lifestyle, you should be able to describe exactly what that lifestyle will look like: Will you sell your home and relocate to a warmer climate? Will you travel the country in a motor home or will you live in a house and travel? Are you going to keep that waterfront summer cottage or sell it? Tell me what each one of these decisions means to your quality of life.

Believe it or not, some people will say the purpose of their money is to provide for their retirement and their children, then they’ll fly to Europe for a first class vacation, neglecting to fund their pension for that year.

The point: Does your money have a purpose? Once you have a purpose, you can set goals around that purpose – and yes, you can have more than one purpose and each can have more than one goal attached. But, your second question is key: Do your actions match your purpose?

To get to any destination, it helps to have a roadmap.

Jim

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER™ and in his 20th year of private practice as Founding Principal of THE INDEPENDENT FINANCIAL GROUP, a fee-only registered investment advisor with clients located in New York, Florida, and California. He’s been a headline speaker at conventions throughout the United States, Canada, and the U.K. and has appeared in `The Journal of Compensation and Benefits’, as well as in The Profit Sharing Council of America’s `Insights’. Jim has also appeared on American Airlines’ `Sky Radio’, heard on more than 19,000 flights. IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description. Nothing contained herein should be regarded as tax or legal advice and the reader is urged to seek competent counsel to address those issues. The above represents the author’s opinion and should not be regarded as investment advice which is provided only to IFG clients upon completion of a formal financial and investment plan. For questions or comments, you can reach Jim at 805.265.5416 or through the IFG website, http://www.indfin.com.

When people retire, they face the decision of what to do with their 401(k) plan assets. Often, for many, it’s the first time they’ve ever had to make important decisions about all the money they’ve worked years to accumulate; and sometimes they get it wrong.

One huge mistake many make is simply requesting a check from their company, intending to open-up an IRA account with the assets.

Not good, The company must withhold 20% for taxes, so a person with a $300,000 account might be surprised to see $60,000 missing as s/he receives a check for $240,000.

The bad news isn’t over. To complete a tax-free rollover, the tax payer must deposit that check for $240,000 in an IRA plus $60,000 from their pocket! And, it must be done within 60-days of receiving their check from the company plan.

Your thinking: `Wait! How is this tax-free if the company withheld the $60,000?’ The answer isn’t pretty, either. The taxpayer may eventually get the $60,000 withheld as a tax refund the following year. That, of course, doesn’t their current cash flow picture.

There’s more you should know if you’re facing an IRA rollover decision. Feel free to request our report, “Six Best & Worst IRA Rollover Decisions”. Just use the Request Info tab on our website.

Jim

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER™ and in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He’s been a headline speaker at conventions throughout the United States, Canada, and the U.K. and has appeared in `The Journal of Compensation and Benefits’, as well as in The Profit Sharing Council of America’s `Insights’. Jim has also appeared on American Airlines’ `Sky Radio’, heard on more than 19,000 flights. IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description. Nothing contained herein should be regarded as tax or legal advice and the reader is urged to seek competent counsel to address those issues. The above represents the author’s opinion and should not be regarded as investment advice which is provided only to IFG clients upon completion of a formal financial and investment plan. For questions or comments, you can reach Jim at 805.265.5416 or through the IFG website, http://www.indfin.com.

What does that mean? Let’s start with this: Do you know how much money it will take for you to retire, with cost of living increases, for the rest of your life? How much will you need in financial assets – not your house, cars, boats, etc. – so that you can have a rising stream of income for the rest of your life in order to preserve your independence and lifestyle.

Some experts believe 50% of the population is now at risk for Alzheimer’s, simply because we’re all living longer. Alzheimer’s care is not covered by Medicare. Full-time care can easily cost $4,500 per month – that’s $54,000 a year, after taxes. And it’s not tax deductible! It’s not uncommon for people to live five to ten years with Alzheimer’s! $54,000 a year times ? years… you do the math. Don’t think it will happen to you? Talk to your friends! I’ll bet virtually everyone you know has been touched by Alzheimer’s.

People are living longer. Living into our 90s is common and you should expect it! If you think you’re going to retire in your mid-60s and you are married, you should plan on two lives over three decades!

Every year, the things you need will cost more. In the early 80s (three decades ago) you could buy a first-class postage stamp for 15-cents. If 10-cents bought everything you needed to live, you might think you’d be sitting pretty with a 5-cent (33%) cushion; but, today the entire 15-cents won’t even buy the stamp! In fact, you’d be draining savings! It would take virtually 3 stamps to buy what 2/3 of a stamp used to buy!

If you don’t have a plan, start now.

If you don’t have your financial house in order, have a talk with your kids now.

NOW! Not this weekend; not during summer vacation; not in the fall. NOW.

If you’re not prepared, they should know it; because they could be the ones living with the financial results. You’re all in it together.

Jim

Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER™ and in his 20th year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located in New York, Florida, and California. He’s been a headline speaker at conventions throughout the United States, Canada, and the U.K. and has appeared in `The Journal of Compensation and Benefits’, as well as in The Profit Sharing Council of America’s `Insights’. Jim has also appeared on American Airlines’ `Sky Radio’, heard on more than 19,000 flights. IFG does not sell products, earn commissions, or accept any third-party compensation or incentives of any description. Nothing contained herein should be regarded as tax or legal advice and the reader is urged to seek competent counsel to address those issues. The above represents the author’s opinion and should not be regarded as investment advice which is provided only to IFG clients upon completion of a formal financial and investment plan. For questions or comments, you can reach Jim at 805.265.5416 or through the IFG website, http://www.indfin.com.